Enthusiasm for sustainable investing is on the rise. However, in all of the excitement a certain amount of confusion persists. The below myths and realities could help debunk some of the myths you may have around sustainable investing.
1. “You give up returns with sustainable investments.”
Actually, returns are comparable to traditional investments. Historically, the S&P 500 Index and the MSCI KLD 400 Social Index, a sustainable equivalent to the S&P 500, perform similarly.1
2. “You can’t measure the impact of a sustainable investment.”
Funds and companies are increasingly reporting on their social and environmental impact. Impact investing, the most intentional sustainable investing strategy, does require measurement.
3. “Sustainable investing is niche and is a fad.”
According to the Global Sustainable Investment Alliance, sustainable investments totaled $23t assets in 2016. Global exchanges had a value of $69t that same year.2
4. “Sustainable investing means excluding companies from your portfolio.”
Exclusionary screening—removing companies that are not values-aligned—is only one sustainable investing approach, alongside ESG integration and impact investing, which are more positive, intentional approaches.
5. “Sustainable investing is all about equities.”
There are multiple sustainable fixed income investments, including green bonds, development bank bonds, corporate bonds and sustainable municipal bonds.
6. “Sustainable investing is only about protecting the environment.”
Sustainable investing incorporates environmental, social and governance (ESG) considerations. Social and governance issues include health and safety, privacy and data security, labor management and business ethics.
7. “I need to be an expert to do sustainable investing.”
Sustainable investing mutual funds, SMAs and ETFs are commonplace today. By 2023, investors expect it to be mainstream.3
8. “Sustainable investments aren’t liquid.”
You can find sustainable investing solutions in public equities and fixed income, in addition to private equity and private debt.
9. “Wealthy investors don’t invest sustainably.”
In the U.S., the richest wealth segment invests sustainably far more than any other. A full 40% of investors with $50M+ invest sustainably, compared to 8% of those with $1 – 2M.3
10. “There are no benchmarks for sustainable investing.”
UBS and others have created benchmarks for various sustainable investing approaches.
Is your portfolio achieving the impact you want? Talk to your UBS Financial Advisor.